Flood insurance is a mess, and Harvey won’t make Congress any more likely to fix it

Hurricane Harvey is sure to add more crushing debt to the National Flood Insurance Program, which is already $25 billion in the red. So when Congress resumes on Tuesday, will it immediately act to fix this troubled program?

Don’t count on it.

Entrenched regional and partisan divisions have sidelined flood insurance reform for years. Those divides could intensify this month as lawmakers confront three tasks: Formulating an aid package for hurricane victims, raising the debt ceiling and reauthorizing the flood insurance program, which is set to expire by Sept. 30.

Given Congress’ track record of action in 2016, few observers expect lawmakers to act on comprehensive flood insurance reform legislation pending in the House and Senate.

“Not likely to happen,” said Steve Ellis, vice president of Taxpayers for Common Sense, a budget watchdog group and longtime advocate for flood insurance reform.

“If we had a Lyndon B. Johnson in office, we could get these deals made,” said R.J. Lehmann, co-founder of the R Street Institute, a conservative think tank that also advocates for flood insurance reform. “Unfortunately, we don’t have an LBJ.”

Ellis and others say the best hope now is that lawmakers will pass a three- or six-month extension of the National Flood Insurance Program, effectively kicking the debate down the road.

If we had a Lyndon B. Johnson in office, we could get these deals made R.J. Lehmann, co-founder of the R Street Institute, a conservative think tank

Ellis, Lehmann and Grande are part of a strange-bedfellow coalition of taxpayer groups, insurance companies, environmental organizations and fiscal hawks. Over the last decade, these groups have lobbied to phase out subsidies for flood insurance and institute other reforms. Members of the SmartSafer coalition, they argue that the NFIP is both financially unsustainable and an enabler of encouraging people to build and rebuild in dangerous floodplains.

The coalition has scored some successes, including a 2012 reauthorization that reduced FEMA’s debt and led to better mapping of flood hazards in states such as North Carolina. “The eyes get a little wider (in Washington) when lawmakers see a broad coalition of interests working together,” said Ellis.

Yet progress has been slow. Roughly five million households nationwide hold federal flood insurance policies. More than half of those are in three states — Florida, Texas and Louisiana — that enjoy sizable clout in Congress and have resisted jacking up premiums on policy holders. In 2014, they helped pass legislation to reverse some of the reforms that Congress had passed two years earlier.

It used to be that support for flood insurance reform was more of a regional issue than a partisan issue, said Lehmann. But now, he said, even lawmakers of opposite parties wanting to reduce NFIP subsidies refuse to cooperate. “Our coalition faces challenges we never had when we started,” he said.

The partisan divide was evident in June, when the House Financial Services Committee passed a legislative package that would reauthorize the flood insurance program for five years, ramp up premiums, fund more flood mitigation programs and make it easier for private companies to offer their own insurance policies.

Democrats opposed several parts of that package, which was shepherded out of committee by Chairman Jeb Hensarling, a Republican who represents a portion of Texas away from the flood-prone coast. The package has since stalled amid concerns from House Republicans with large numbers of floodplain constituents, namely House Majority Whip Steve Scalise of Louisiana.

Each year on average, the flood insurance program pays out $3 billion more than it collects in premiums, a key reason it has accumulated a debt of nearly $25 billion. In 2005, FEMA borrowed more than $17 billion from the U.S. Treasury to pay claims related to Hurricane Katrina, and Hurricane Sandy triggered another $9 billion in borrowing.

Harvey’s flooding will add to the program’s woes. Texas’ Harris County, which includes Houston, has nearly 250,000 insurance policies. The hurricane has likely caused tens of billions of dollars in damages, a portion of which the NFIP will be obligated to cover.

For Congress, one immediate task is dealing with FEMA’s cash flow. As of Wednesday, FEMA had $1.4 billion in its major disaster account, which could quickly become exhausted as the agency pays for temporary housing and other costs. Tom Bossert, the White House Homeland Security advisor, said on Wednesday the president would be asking Congress for an initial supplement to FEMA’s budget “shortly,” followed by a larger disaster relief request.

If Congress doesn’t reauthorize the National Flood Insurance Program, the program would “lapse” and FEMA would be unable to sell more policies. The last time that happened, in 2010, an estimated 46,800 home sales transactions were interrupted or canceled, according the National Association of Realtors.

Grande, the insurance industry lobbyist, said he seriously doubts that would happen again. “The politics of Harvey right now won’t allow any politician to let the insurance program lapse,” said Grande, who expects Congress to pass a simple short-term extension of the NFIP, as it has several times before.

But Lehmann fears that even a simple extension of the insurance program could get ground up in the sausage making that is about to ensue. To secure votes to raise the debt ceiling, congressional leaders may attempt to tie that measure to Hurricane Harvey aid, a possibility that is already drawing resistance.

Renewal of the NFIP could also be drawn into that deal making, he said.

“It should be easy to get a continuing resolution on flood insurance,” he said. “But these days, nothing is easy in Washington.”